The Economic Impact of the UK Film Industry - BFI - British Film ...

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Economic Contribution of the UK Film Industry July 2007 We then sought to improve on the performance of Equations 2 and 3 by introducing a number of other variables. Robertson (2003) 33 finds that the size of advertising spend promoting a film has a significant impact on the revenue it earns at the box office. We therefore include the value of a film’s advertising in the UK in Equation 2. We also experimented with dummies for ten film genre types (taking the value 1 if a film was, for example, a comedy, and zero otherwise). Virtually all of the film genre type dummies proved statistically insignificant and we therefore dropped them from the final specification. Our preferred equation is shown below. Its’ overall performance is good, being able to explain three- quarters of the variation in films’ box office receipts in the UK. It confirms that cinema audiences are prepared to pay more to see a film produced domestically. The β coefficient, which is statistically significant, suggests that UK films’ box office receipts are around 30% higher than if the same film was made elsewhere. UK Box Office Revenues (2000 to 2006) Dependent Variable: log(BO jUK ) Coefficient Std. Error t-Statistic Prob. α 1.5 0.2 7.5 0.0 β 0.3 0.1 3.5 0.0 δ 0.4 0.0 20.3 0.0 γ 2.0 0.1 23.6 0.0 λ where: 0.5 0.0 23.6 0.0 ln( BO jUK ) = α + β ∗ Film UK j + δ ∗ ln( Film UK j ∗ exp( γ ) ∗ BO jUS + ( 1− Film UK ) ∗ BO ) + λ ∗ ln( Advertising Expenditure ) j jUS Observations: 1470 ---------------------------------------------------------------------------------------------------------------- R-squared 0.76 Mean dependent var 13.17 Adjusted R-squared 0.76 S.D. dependent var 2.35 S.E. of regression 1.15 Sum squared resid 1952.01 Durbin-Watson stat 1.87 33 Robertson, T, (2003), ‘Advertising effectiveness in UK film distribution’, A report for the UK Film Council, September. j 53
8.3. Other evidence on the cultural value of UK film Economic Contribution of the UK Film Industry July 2007 Looking at box office revenue data therefore suggests that films with UK content are valued significantly by the film-going public. But, as discussed above, the full cultural value that people place on UK film may not be reflected in box office revenues. It is conceivable that the total cultural value placed on film could exceed that reflected in box office revenues owing to significant so-called ‘consumer surplus’ – where consumers value a service more highly than the price they have to pay for it - and externalities from such things as national self-esteem and identity. One common approach to establishing the total value of cultural activities is to conduct surveys that ask people directly. A traditional survey was commissioned by the UK Film Council from Omnimas on ‘Public Attitude to Film on TV’. Over three-quarters of the sample indicated that they consider films on television an enjoyable activity, with younger groups more likely to agree. Over one-third of the sample thought there should be more films on television, with only 5% believing there were too many. So, the survey found people placed a high valuation on film relative to other forms of visual entertainment. But, further to this, the survey found clear support for UK film. About 81% of the survey agreed that television companies should support the British film industry by showing more UK-made films, and 77% agreed that UK films are an important part of British heritage. This is clear evidence that people place an extra value on the cultural content of UK film. Another, more sophisticated, approach to establishing value involves conducting ‘contingent valuation’ surveys. These surveys vary in form but, in essence, ask people a structured set of questions that seek to draw out of them the cash value they attach to a particular subject. There has not been a large survey on the value of the core UK film industry of this sort. But there have been a number of other studies that may help inform an estimate of the overall cultural value of the industry: • The BBC is a similar institution to the core UK film industry in that it provides a key outlet for UKoriginated cultural content. The Corporation undertook a contingent valuation study 34 using a variety of survey types in its submission to the Independent Panel on its charter review in October 2004. The study revealed an overwhelming support for the BBC across the UK, with 81% of the population agreeing that the BBC is worth the licence fee cost of £121 per year. On average, people valued the BBC at around twice the rate of the licence fee, that is £20 a month or £240 a year. Given the concentration of UK-specific content on the BBC compared to that available on other broadcasters, this provides evidence of the high valuation placed on UK-originated audiovisual content. In fact, the highest valuation on the BBC was placed by those with multi-channel television - suggesting that UK cultural content was particularly highly valued where there were alternatives. • Another contingent valuation study 35 looked at the benefits that the Australian community derived from having the mandatory transmission of Australian-originated programmes on their television 34 Fauth, R, Horner, L, Mahdon, M and Bevan, S, (2006), ‘Willingness to pay for the BBC during the next Charter period: A report prepared for the Department of Culture, Media and Sport’, September. 35 Papandrea, F, (1999), ‘Willingness to pay for domestic television programming’, Journal of Cultural Economics, Vol. 23, No. 3, pages 147-164, August. 54
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